Post-Pandemic Global Trade and Inflation Impact on Investors

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Did Pandemic Reshape Supply Lines? Impact of Inflation on Investors

By Blu Putnam, Chief Economist & Erik Norland, Senior Economist, CME Group

High Costs May Hinder Changes to Supply Lines

  • Pandemic exacerbated disruption of supply lines that began with US-China trade war.
  • A shift in consumer spending during pandemic from goods to services benefited China.
  • Diversifying global supply lines optimized for costs could pose financial, logistical challenges.
  • Lower corporate profits and higher consumer prices could be a compromise solution.
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Inflation Could Flip Stocks-Bonds Correlation

  • Ten-year Treasury yields have slipped from 14% in 1980 to 1.6% currently.
  • Quantitative easing, improved growth prospects have raised inflation concerns.
  • Rising bond yields in March could flip the negative stocks-bonds correlation.
  • A positive stocks-bonds correlation could limit portfolio diversification.
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